US annual inflation eased slightly to 3.4% in July, after energy prices fell from their late-April peak. However, prices remain elevated compared with before the Iran war, leaving pressure on household budgets and complicating the Federal Reserve’s response to weak employment figures.

Inflation had fallen by 0.7% in June during a short US-Iran ceasefire, but rose after the peace agreement collapsed and oil prices increased again. Average US petrol prices stand at about $4 a gallon, roughly $0.85 higher than a year earlier, while July also saw 23,000 jobs lost and earlier employment gains revised down by 103,000. The figures may reduce pressure on the Fed before its September meeting, although policymakers remain divided over interest rates and inflation is still above the 2% target.